Watt Sings Different Tune on Principal Forgiveness: Onsite Coverage

WASHINGTON — Congressman Mel Watt (D-N.C.), nominated to head the Federal Housing Finance Agency, may change his position supporting principal forgiveness at Fannie Mae and Freddie Mac, should he be confirmed.

Sen. Pat Toomey initiated the exchange. The Pennsylvania Republican said he was concerned about Watt’s support of principal forgiveness as a Congressman, when he signed a letter in December 2012 supporting forcing Fannie and Freddie to forgive part of the principal owed by underwater borrowers.

Watt said he didn’t think the issue was a relevant today as when it was first posed to the FHFA 18 months ago, because home prices have increased and fewer homeowners are underwater on their mortgages.

However, should Watt be asked to consider principal forgiveness – and he said he suspects he would – he would carefully study how Acting Director Edward DeMarco’s reached his decision not to implement principal forgiveness, consider any new information available, and make a responsible decision.

As for his support of principal forgiveness in the House, Watt said he signed the letter because he was representing his constituents in North Carolina, many of whom were underwater on their mortgages.

“I will be as strong an advocate for taxpayers in this role, because I would view them as my constituents,” he said, presumably implying he may have a different view if confirmed.

Watt, who was joined on the confirmation panel by NCUA Board nominee Richard Metsger and three others, received most of the questions from committee members. In his opening statements, Watt stressed he would cooperate with Congress to implement whatever housing finance reform is legislated, including more private capital, the winding down of Fannie Mae and Freddie Mac, and even the elimination of the Federal Housing Finance Agency. Should he find himself out of a job, Watt said in answer to a question, it would mean the crisis had been over.

Ranking Member Mike Crapo (R-Idaho) asked Watt if he believed the FHFA director has the legal authority to use revenue collected from Fannie Mae and Freddie Mac to fund social initiatives, or should that revenue be used to maximize the GSE’s net worth.

Watt said the issue has been statutorily addressed, allowing the GSEs to “do things that don’t yield the same kind of return, in some cases.” He noted that the competing directives creates a tension in the statute.

“That’s not an authority to make irresponsible loans, but it is built into the statute,” he said. “It must be done responsibly, and I pledge to you I would do that responsibly.”

Jason Furman, nominated to be a member and chairman of the Council of Economic Advisers, outlined the steps he would take to continue the promotion of a broad based economic recovery, should he be confirmed.

Furman said he would increase investments in the country’s infrastructure, provide tax credits to help small businesses expand their payrolls, reform entitlement programs and the tax code to put the deficit on a more sustainable course, and expand housing credit to continue progress in the housing market’s recovery.

Metsger was nominated to fill the NCUA Board position vacated by Gigi Hyland, who exited the board in October 2012. Metsger now must pass a full Senate vote before he is sworn in.

Other nominees taking part in the hearing included Kara M. Stein and Michael Piwowar, both nominated to be members of the Securities & Exchange Commission.